What Customer Experience Initiatives Can Learn from Loyalty Marketing

KMclauchlin@loyalty.com

October 23, 2017

Blog-WhatCustomerExperience

Modern marketing is a constantly evolving landscape, with new technological innovations arriving at an incredibly rapid rate. The past 5 years alone have brought countless new MarTech options to the table, growing from an estimated 150 tech solution providers in 2011 to over 3,000 in 2016[1].

This steady march of innovation has led not only to better methods of reaching consumers, but also to surefire ways to track how communications impact revenue and buying behavior. What began as a mass marketing approach - casting a wide net with little knowledge of who saw a communication or how it influenced sales - has today evolved into targeted 1:1 communications with customers that can be tracked by marketing attribution tools that can directly correlate those communications to sales.

As customer experience continues to grow as a priority organizationally, the accountability for delivering an excellent customer experience often sits with the CMO. A recent study from the Economist Intelligence Unit found that 86% of CMOs and senior marketing executives believe they will own the end-to-end customer experience by 2020[2] . . . so why has the world of customer experience failed to keep up with modern marketing when it comes to leveraging data to make better decisions?

Today’s Customer Experience practitioners could (and should) take a closer look at what’s happening in the world data-driven marketing – the loyalty field in particular. Here are three best practices from the field that you can borrow to improve their customer experience initiatives.
 

Start with customer value.

A key lever in the cost of all Loyalty Programs is the percentage of sales allocated to funding the program’s rewards, which is referred to as the funding rate. CFO’s care most about the funding rate at a macro level, but loyalty practitioners know that not every customer deserves the same investment. High value and high potential value customers should get a larger share, which often comes to life through accelerated earn rates in program tiers.

Investing proportionally to current and potential value is not how most organizations invest in their customer experience, but it should be. Too often, organizations will make changes to their experience without considering who wants the change or which customers will be most affected - often because they’ve given the same weight to low and high value customer’s feedback. Even worse, some companies aren’t even able to determine who the feedback is coming from in the first place. When designing your Voice of Customer (VOC) program, be sure to place greater emphasis on your high value customers and carefully consider what value low value customers’ feedback provides. It may not be actionable or worth collecting.
 

Bring it back to the behavioral data.

Marketers, particularly loyalty marketers, work tirelessly to measure and monitor the impact their initiatives have on sales. Be it through driving frequency or basket size, it almost always comes back to the dollars and cents. CMO’s must constantly make budgetary tradeoffs, and loyalty marketers have learned that the best way to earn their share of the pie is proving that loyalty investments generate a positive ROI.

Despite being the primary organizational tracker for customer experience successes, VOC programs typically only examine satisfaction, not how that satisfaction (or lack thereof) impacts revenue.  For a customer experience initiative to be successful, it must be measured by its ability to generate business impact and a positive ROI.

Organizations should focus on pinpointing and improving the areas of the customer experience where there is topline potential - touchpoints where your high value, and high potential value customers are experiencing friction. Once you’ve identified the touchpoints, be sure to balance the impact of the improvements with expected cost.

For instance, consider a grocer has identified that their customers have a problem with the quality of the products and that fixing that problem represents significant topline potential. The grocer might consider various courses of action - anything from switching to a higher quality supplier to improving displays. If both solutions are expected to generate the same incremental sales yet improving how products are displayed costs far less investment – that’s the best solution for the bottom line.
 

Make it personal.

Behavioral data can be used for more than measurement - it offers tremendous potential to help personalize the customer experience. Marketing has long focused on personalizing every aspect of a communication, and in loyalty marketing using behavioral inputs to predict a customer’s likely response to a campaign is table stakes. A company might send out a campaign to a group of thousands, and thanks to personalization through data-driven dynamic content, not a single email looks the same.

These practices are already spreading to other areas of the organization. Today, merchandising teams are using behavioral data to understand what products should be listed or delisted, and what those products should be priced. Yet, in customer experience, rarely do brands unlock the potential of their databases. According to Forrester, less than half (47%) of customer insights professionals are applying their insights to customer experience management[3].

Like a campaign response model, it’s now possible to connect customer feedback to the identifiable customer base through predictive models. This is the foundation for personalization. Imagine no longer being limited to the small sample sizes of your VOC program. Imagine having customer experience data for your entire identifiable database. Imagine if you could aggregate that data by segments, region or even by store. Would it change how you invest? 

If you consult a myriad of publications you’ll see that customer experience is consistently ranked among the top, if not the top, priority for most organizations – retail in particular. Forrester found that improving customer experience is third highest priority for business and technology decision makers and influencers in the next year, behind only growing revenue and reducing costs[4].  Yet despite this emphasis, organizations are often disappointed by the ROI of their customer experience initiatives.

Data is the key to avoiding that disappointment, and the better an organization can leverage behavioral data to guide their customer experience initiatives the better off they will be. Marketing teams have vast experience in managing and applying behavioral data – leaning on them when improving your customer experience initiatives will help shape those initiatives into a source of positive, and of course quantifiable, business impact.

 

[1] Chiefmartec.com, Marketing Technology Landscape Supergraphic, 2016
[2] The Economist Intelligence Unit. The path to 2020: Marketers seize the customer experience, 2016
[3] Forrester, Analyzing Analytics: Measure The Impact Of Customer Analytics To Prove Its Value, 2017
[4] Forrester, Embrace Decentralized Decision Making, But Keep Planning Holistic, 2017

Customer Experience

Global Solutions

Customer Analytics

Retail

CX

About the author

KMclauchlin@loyalty.com

Kate McLauchlin

Product Owner, Global Solutions

In Kate’s role on Global Solutions, she is a key contributor to WisePlum – a SaaS-based insights tool designed to answer one critical question for retailers: Where should they invest in the customer experience to increase top line revenue growth and market share?

Kate’s goal is to bring data to life to create actionable insight. She is passionate about empowering retailers with user friendly products to analyze, interpret and act on their customer data.

In her time at LoyaltyOne, she has held roles in Global Solutions, Consulting, and Research & Development. Using a variety of customer engagement strategies, from loyalty to customer experience, Kate has helped her clients better engage their customers and drive profitable behaviour change.

Prior to joining LoyaltyOne, Kate was at Fairmont Raffles Hotels International where she delivered marketing campaigns rooted in data, with a strong track record for financial results. She holds an Honors degree in Business Administration from the Richard Ivey School of Business.

What Customer Experience Initiatives Can Learn from Loyalty Marketing

Jul 4, 2018, 12:24 PM
Modern marketing is a constantly evolving landscape, with new technological innovations arriving at an incredibly rapid rate...
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Publication date : Oct 23, 2017, 00:00 AM

Modern marketing is a constantly evolving landscape, with new technological innovations arriving at an incredibly rapid rate. The past 5 years alone have brought countless new MarTech options to the table, growing from an estimated 150 tech solution providers in 2011 to over 3,000 in 2016[1].

This steady march of innovation has led not only to better methods of reaching consumers, but also to surefire ways to track how communications impact revenue and buying behavior. What began as a mass marketing approach - casting a wide net with little knowledge of who saw a communication or how it influenced sales - has today evolved into targeted 1:1 communications with customers that can be tracked by marketing attribution tools that can directly correlate those communications to sales.

As customer experience continues to grow as a priority organizationally, the accountability for delivering an excellent customer experience often sits with the CMO. A recent study from the Economist Intelligence Unit found that 86% of CMOs and senior marketing executives believe they will own the end-to-end customer experience by 2020[2] . . . so why has the world of customer experience failed to keep up with modern marketing when it comes to leveraging data to make better decisions?

Today’s Customer Experience practitioners could (and should) take a closer look at what’s happening in the world data-driven marketing – the loyalty field in particular. Here are three best practices from the field that you can borrow to improve their customer experience initiatives.
 

Start with customer value.

A key lever in the cost of all Loyalty Programs is the percentage of sales allocated to funding the program’s rewards, which is referred to as the funding rate. CFO’s care most about the funding rate at a macro level, but loyalty practitioners know that not every customer deserves the same investment. High value and high potential value customers should get a larger share, which often comes to life through accelerated earn rates in program tiers.

Investing proportionally to current and potential value is not how most organizations invest in their customer experience, but it should be. Too often, organizations will make changes to their experience without considering who wants the change or which customers will be most affected - often because they’ve given the same weight to low and high value customer’s feedback. Even worse, some companies aren’t even able to determine who the feedback is coming from in the first place. When designing your Voice of Customer (VOC) program, be sure to place greater emphasis on your high value customers and carefully consider what value low value customers’ feedback provides. It may not be actionable or worth collecting.
 

Bring it back to the behavioral data.

Marketers, particularly loyalty marketers, work tirelessly to measure and monitor the impact their initiatives have on sales. Be it through driving frequency or basket size, it almost always comes back to the dollars and cents. CMO’s must constantly make budgetary tradeoffs, and loyalty marketers have learned that the best way to earn their share of the pie is proving that loyalty investments generate a positive ROI.

Despite being the primary organizational tracker for customer experience successes, VOC programs typically only examine satisfaction, not how that satisfaction (or lack thereof) impacts revenue.  For a customer experience initiative to be successful, it must be measured by its ability to generate business impact and a positive ROI.

Organizations should focus on pinpointing and improving the areas of the customer experience where there is topline potential - touchpoints where your high value, and high potential value customers are experiencing friction. Once you’ve identified the touchpoints, be sure to balance the impact of the improvements with expected cost.

For instance, consider a grocer has identified that their customers have a problem with the quality of the products and that fixing that problem represents significant topline potential. The grocer might consider various courses of action - anything from switching to a higher quality supplier to improving displays. If both solutions are expected to generate the same incremental sales yet improving how products are displayed costs far less investment – that’s the best solution for the bottom line.
 

Make it personal.

Behavioral data can be used for more than measurement - it offers tremendous potential to help personalize the customer experience. Marketing has long focused on personalizing every aspect of a communication, and in loyalty marketing using behavioral inputs to predict a customer’s likely response to a campaign is table stakes. A company might send out a campaign to a group of thousands, and thanks to personalization through data-driven dynamic content, not a single email looks the same.

These practices are already spreading to other areas of the organization. Today, merchandising teams are using behavioral data to understand what products should be listed or delisted, and what those products should be priced. Yet, in customer experience, rarely do brands unlock the potential of their databases. According to Forrester, less than half (47%) of customer insights professionals are applying their insights to customer experience management[3].

Like a campaign response model, it’s now possible to connect customer feedback to the identifiable customer base through predictive models. This is the foundation for personalization. Imagine no longer being limited to the small sample sizes of your VOC program. Imagine having customer experience data for your entire identifiable database. Imagine if you could aggregate that data by segments, region or even by store. Would it change how you invest? 

If you consult a myriad of publications you’ll see that customer experience is consistently ranked among the top, if not the top, priority for most organizations – retail in particular. Forrester found that improving customer experience is third highest priority for business and technology decision makers and influencers in the next year, behind only growing revenue and reducing costs[4].  Yet despite this emphasis, organizations are often disappointed by the ROI of their customer experience initiatives.

Data is the key to avoiding that disappointment, and the better an organization can leverage behavioral data to guide their customer experience initiatives the better off they will be. Marketing teams have vast experience in managing and applying behavioral data – leaning on them when improving your customer experience initiatives will help shape those initiatives into a source of positive, and of course quantifiable, business impact.

 

[1] Chiefmartec.com, Marketing Technology Landscape Supergraphic, 2016
[2] The Economist Intelligence Unit. The path to 2020: Marketers seize the customer experience, 2016
[3] Forrester, Analyzing Analytics: Measure The Impact Of Customer Analytics To Prove Its Value, 2017
[4] Forrester, Embrace Decentralized Decision Making, But Keep Planning Holistic, 2017

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  • Customer Experience
  • CX
  • Global Solutions
  • Retail
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Author : Kate McLauchlin
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